The dollar index (DXY00) this morning is up by +0.08%. The dollar today recovered from early losses and moved higher after T-note yields climbed on signs of strength in the US economy after weekly jobless claims were unchanged and the Apr Philadelphia Fed business outlook survey unexpectedly rose to a 2-year high. The dollar extended its gains based on comments from NY Fed President Williams this morning, who said there's "no urgency" to cut interest rates.
US weekly initial unemployment claims were unchanged at 212,000, showing a stronger labor market than expectations of an increase to 215,000.
The US Apr Philadelphia Fed business outlook survey unexpectedly rose +12.3 to a 2-year high of 15.5 versus expectations of a decline to 2.0.
US Mar existing home sales fell -4.3% m/m to 4.19 million, slightly weaker than expectations of 4.20 million.
US Mar leading indicators fell -0.3% m/m, weaker than expectations of -0.1% m/m.
NY Fed President Williams said there's "no urgency" to cut interest rates, and economic data will determine the timing of rate cuts.
The markets are discounting the chances for a -25 bp rate cut at 3% for the next FOMC meeting on April 30-May 1 and 16% for the following meeting on June 11-12.
EUR/USD (^EURUSD) today is down by -0.15%. The euro today gave up an early advance and turned lower on long liquidation as the dollar recovered. EUR/USD is also under pressure from today’s economic news that showed Eurozone Mar new car registrations fell by the most in 20 months. The euro initially moved higher after the Bundesbank upgraded its assessment of the German economy in the first quarter.
Eurozone Mar new car registrations fell -5.2% y/y, the biggest decline in 20 months.
Eurozone Feb construction output rose +1.8% m/m, the biggest increase in a year.
In its monthly report, the Bundesbank upgraded its assessment of the German economy and said the German economy in Q1 may have seen a "slight increase" in growth, an improvement from March when they projected the economy contracted in Q1.
ECB Executive Board member de Guindos said that should officials' confidence in meeting the 2% target for consumer-price growth increase, "it would be appropriate to reduce the current level of monetary policy restriction."
Swaps are discounting the chances for a -25 bp rate cut by the ECB at 87% for its next meeting on June 6.
USD/JPY (^USDJPY) today is up by +0.06%. The yen today is slightly weaker on dovish comments from BOJ member Noguchi who said there's still some distance to go before achieving the BOJ's 2% inflation target. Higher T-note yields today are also undercutting the yen.
Losses in the yen are limited after the BOJ's semiannual Financial System report said Japanese corporate financial conditions have been improving. Also, the market is wary of intervention in the forex market to support the yen after the US, Japan, and South Korea issued a trilateral statement acknowledging the serious concerns that Japan and South Korea have about the recent weakness in their respective currencies.
The Japan Feb tertiary industry index rose +1.5% m/m, stronger than expectations of +0.5% m/m and the largest increase in 2-1/2 years.
In a trilateral statement, the US, Japan, and South Korea said they would continue to consult closely on foreign exchange market developments while acknowledging Japan's and Korea's serious concerns about the recent sharp depreciation in their currencies.
The BOJ, in its semiannual Financial System report, said corporate financial conditions have been improving, and firms as a whole are fairly resilient to stress. Many Japanese companies have sufficient profitability to withstand rising interest rates.
BOJ member Noguchi said there's still some distance to go before achieving the BOJ's 2% inflation target.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 1% for the April 26 meeting and 39% for the following meeting on June 14.
June gold (GCM4) this morning is up +10.20 (+0.43%), and May silver (SIK24) is up +0.130 (+0.46%). Precious metals today are moderately higher. Dovish central bank comments today boosted precious metals after BOJ member Noguchi said there's still some distance to go before achieving the BOJ's 2% inflation target. Also, ECB Executive Board member de Guindos expressed his support for the ECB in cutting interest rates at its June meeting. Concerns about escalating geopolitical tensions in the Middle East continue to support safe-haven demand for precious metals. Silver has carryover support from today’s rally in copper prices to a 1-3/4 year high.
Strength in the dollar today and higher T-note yields are bearish for precious metals. Also, today’s US unemployment claims and Philadelphia Fed reports signaled strength in the economy that is hawkish for Fed policy.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
